Microfinance – the way to eradicate poverty
The microfinance Industry all over the world is trying hard to eradicate poverty on a global scale. Some of them have been succeeded, some have failed. Well, everything has some positive and negative sides. When embracing new things, we need to take both the positive and negative aspects of them. The same thing can be said for the Microfinance Industry as well.
Banking Vs Microfinance Industry
The banking and Microfinance industries are quite similar. Although these two types of business are related to financial services, still there are many differences. Just take an example of that.
Taking loans from the Bank and Microfinance Company (MFI) is not the same thing. It’s nearly impossible to get credit from banking institutions for poor people or unorganized businesses. Without providing valuable resources, none can take a loan from Banks.
But Microfinance Loans are not that hard to get. People with fewer or no resources can get credit from the MFIs. There is no requirement of excellent credit score, previous credit records, and submission of collateral, and so on. These things are crucial to get a bank loan. But Microfinance companies can award credits to the people without those things.
The Real Issues of Microfinance Industry
Providing loans to the underprivileged sections of society is not a problem. The real issue comes to play when recovering the loan. Many of the MicroLoan receivers can repay their microloans taken from the MFIs. As a result, the MFI suffers. This is probably the worst issue that MFIs are facing today.
The meltdown of the Microfinance Industry was seen in the nations like Nicaragua, Morocco, Pakistan, Mexico. We have seen this kind of scenario in India, too. In late 2010, the MFI industry in Andhra Pradesh has collapsed. The ‘Unable to pay loan’ scenario has affected many families as well as companies.
As MFIs don’t assess a person before providing microloans, there is a chance not the get the repayment. There are other issues like the extremely high rate of interest on microloans. People take loans in times of emergency, so they don’t have the chance to bargain with the ROI of the Loan. It was seen that some MFIs have charged extreme ROI at the time of providing loans.
Is there any Solution?
The industry leaders are relentlessly trying to find the answer “how to eradicate the issues of Microfinance Industry?” MFIs are crucial to eradicate poverty from the face of the world. So, it needs to survive.
Now, it’s time to introduce modern technologies into the Microfinance Industry. We can utilize modern inventions like Digitalization, Artificial Intelligence, Machine Learning, and Big Data. These things can be implemented in advanced Microfinance Management systems.
Microfinance Management System can be called “Microfinance Software.” There are many areas to explore in this regard. If the software were integrated with those modern developments, they can help in erasing many issues that are plaguing the MFI industry.
Role of Modern Technologies
We need to explore all the areas of modern technologies and see how it will improve the Microfinance Industry.
Artificial Intelligence and Machine Learning
Actually, Machine Learning is a process of Artificial Intelligence. With machine learning, a machine or software can learn from the prior set of information and data. It does that automatically. So, when implementing the same into modern Microfinance software, it will learn from the past mistakes as well as achievements and try to replicate successful methods and cut off all previous mistakes.
Digitalization
With Digitalization, MFIs can go global. The presence of the internet can be found in almost all parts of the world. With it, more people can know about the services of Microfinance and avail themselves it. The more people it will reach, the more people will get the benefits.
Big Data
The finance business can generate lots of data and records. These data and information are very crucial to analyze the overall business scenario of Microfinance. But the emergence of Big Data has revolutionized it. Incorporating Big Data with Microfinance Software would be crucial for the bright future of the Microfinance Industry. It will help the industry leaders to make a crucial and quick decision by exploring the crucial insights.
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